McDonald’s is set to see a modest profit from its $5 meal deal, with profit margins estimated to be between 1% and 5%, translating to earnings of approximately $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract consumers who are feeling the pinch of inflation, with the hope that once customers are drawn in by the $5 offer, they will make additional purchases.
However, the actual profitability of the deal will hinge on various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that even if the meal deal encourages diners to visit the restaurants, franchise owners may not see those profits due to the nature of franchise operations.
Approximately 95% of McDonald’s locations are franchise-owned, meaning owners set their own prices and bear extra costs like rent, insurance, permits, and taxes. In a statement earlier this year, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often try to offset these overhead costs through promotional offers like the $5 meal deal.
Spiegel highlighted that while the bundle aims to attract customers, it serves primarily as a “loss leader” to bring customers in and retain them. After accounting for additional expenses tied to labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners often lose any potential profit across the items included in the deal.